Outlook for the Genoa G8 Summit of 2001

Nicholas Bayne
International Relations Department
London School of Economics and Political Science

These remarks set out my impressions of the preparations for the Genoa Summit so far and of where I think Genoa is going.

In my view the Italian preparation for Genoa has been exemplary in two respects:

First, they have taken great efforts to maintain continuity with Okinawa, building on various foundations laid at the summit last year.

Second, they have tried to identify three closely defined themes on which they want the Genoa Summit to concentrate. These themes are:

Poverty reduction, where the Finance Ministry has been very much in the lead;

The global environment;

Conflict prevention, where the Foreign Ministry has the lead.

My interest in the Summit process is essentially on the economic side so I shall not say anything more on conflict prevention.

Poverty Reduction

Let me start with the Italians' concept of poverty reduction. They have set the scene for the summit declarations by tabling at an early stage, as an Italian Presidency document, a paper which originated in the Italian Finance Ministry and is called Beyond Debt Relief. This recognizes that the G8 Summit, in recent years, has focussed its whole development activity on debt relief advance for low-income countries. But it is now necessary to branch out and go beyond debt relief.

The document focuses on four areas where it is necessary to go beyond debt relief:

Trade;

Investment;

Health;

Education.

I shall comment mainly on trade and health.

Trade

The trade component of this document is very important, in that it argues the case that expansion of trade, the opening of markets and the spread of external competition are the best ways for developing countries to stimulate their growth and to catch up with the mature industrial countries. But before I go on to what is specifically related to the problems of poor countries, I want to focus on another key international trade issue, which I would expect to be one of the two leading economic topics addressed at Genoa. This is how to launch a new round of multilateral trade negotiations within the WTO. How can the G8 Summit best prepare the ground for a successful WTO ministerial meeting at Doha towards the end of this year?

I have argued that previous summits - Birmingham, Cologne, Okinawa - have not performed well on international trade. This was because the Europeans and the North Americans failed to reconcile their different concepts of what the agenda for the new WTO round should be. Now they have another chance to produce an agreed position - probably their last chance. If the Doha WTO meeting fails to launch a new round than the prospects for having a new round at all look problematic.

Let me look at how the main players in international trade among the G8 are coming at this. I am sorry I do not have a Canadian component for this, but I can comment on the European Union, the United States and Japan:

The European Union, long before the Seattle WTO meeting of 1999, has been promoting the idea of a comprehensive round with a broad agenda. The EU maintains that view: but it has become increasingly convinced that, in order to get the new round launched, they must respond more to the interests and aspirations of developing countries. The EU before Seattle claimed that it was doing just that, but this was open to doubt. Over the past eighteen months, the EU Trade Commissioner, Pascal Lamy, has taken immense efforts to seek out the opinion of the leading developing countries, so that whatever emerges from the G8 in Genoa should respond to what developing countries want.

In the United States, the new administration of George Bush II and especially the new US trade representative, Bob Zoellick (himself a former US sherpa) have strong liberalising credentials in international trade. They are committed to seeking 'trade promotion authority' (the new name for fast track authority) in the course of the present year, so as to re-launch negotiations both for the Free Trade Area of the Americas and for a new WTO round. This will not be easy, given the composition of the US Congress, but there seems to be considerable determination on the part of the Administration. What is less certain is whether the Americans have drawn the same conclusions as the Europeans have, namely that it is essential that the agenda proposed for the new round responds to the needs and aspirations of developing countries. The Americans at Seattle didn't show much sensitivity on that score; it is not yet clear whether the new Administration has got the message.

As for Japan, the Japanese have always been closer to the European position than the American. They want a round with a large agenda and they have particular objectives to pursue. But I have heard that the Japanese have been saying that they want to be the mediators between the Europeans and the Americans.

That is the line up for the key trade topic - launching the new WTO round. But there is a second important trade issue and that is what can be done to help poor countries benefit more from the world trading system, because it is now realized that the poorest countries are falling behind. Their share of world trade has been falling, and they need special help so that they can catch up.

The main advance since Okinawa is that the European Union brought into effect, from March of this year, measures which enable all the products of least developed countries to enter the European Union free of tariffs and quotas. This is with the exception of armaments and of three agricultural commodities - bananas, rice and sugar - for which there are transitional periods of several years before the barriers are removed. The objective of the European Union in doing this was twofold. First, they wanted to show developing countries that they were serious in wanting to help them and were not just doing things for their own interests. Second, they hoped that they would set an example to the rest of the G7 countries likewise to remove the barriers. My impression is that the example so far has not been followed in a spectacular way. Certainly the Americans are saying that the measures they introduced last year for the benefit of African and Caribbean countries are the furthest they can go at present. But I would expect this to be a major issue of discussion as Genoa approaches. It will be linked to another topic which relates directly to Okinawa - namely capacity-building for poor countries. This form of technical assistance, whether bilateral or through the WTO, is intended to help these countries to find their way around the WTO regime and to build up their ability to take advantage of the world trading system.

Health

In my view, health is the second economic area where the Genoa Summit could really make a difference and where there is a reasonable chance it can grab the headlines. Okinawa started a serious discussion on the health problems of poor countries, particularly focusing on action to combat infectious diseases like AIDS, malaria and tuberculosis. The Italians have built on this and have gathered support among the other G7 members - the British, the Canadians (I believe) and now the Americans - in support of the idea that the Genoa Summit should announce the creation of a Global Health Fund. This fund would finance the supply to poor countries of drugs, vaccines and other health products, particularly in the fight against these three diseases. It would not necessarily be limited to these three but it would have a particular focus on grappling with the AIDS epidemic in Africa and on the chronic scourges of malaria and tuberculosis, which mainly afflict poor countries.

The idea is that there should be very substantial sums of money, mobilized partly from governments, but also with strong matching from the private sector, from the major pharmaceutical firms, from large business enterprises of all kinds and from charitable foundations in the medical field. The hope is that, with all three working together, a really well-endowed fund could be put together. Its specific purpose would be to supply health products and it would require matching activity by the developing countries to put their own health systems into shape. There is no suggestion that the industrial world take over the running of the health systems of these countries. They must retain ownership of their own health systems, but would receive very substantial assistance.

There is a sub-plot and I am not yet sure how it will work out. This concerns the anxieties of the pharmaceutical companies in regards to the intellectual property rights attached to their products. They will need some form of guarantee that the drugs that they supply cheaply to the poor countries do not find their way back via circuitous routes to the rich industrial country markets.

Education is often considered together with health, but my impression is that the discussion on education is not so far advanced. The foundations laid at Okinawa were less substantial. There is not an obvious crisis in education, in the way that there is with the AIDS epidemic. So I think while Genoa should move the discussion forward and thicken it out, I do not foresee such spectacular results.

Other Issues: IT, Renewable Energy, Debt Relief

Several other areas of follow-up to the Okinawa summit are worth mentioning in the context of Genoa:

The first is information technology, where the Okinawa summit created the Digital Opportunity Task-Force - the dot-force - with the particular aim of overcoming the digital divide as between rich and poor countries and using IT to enable poor countries to skip several stages of development.

Second, another task force was launched at Okinawa to develop new sources of renewable energy which could be of particular use in poor countries.

In the course of the work that has been done since Okinawa, it has been recognized that there is a synergy between these two subjects. It is quite often by mobilizing new sources of energy, such as solar power, that it becomes possible to bring IT access to poor communities that were denied it before.

The private sector is deeply involved in both task forces. Representatives of the business community and NGOs participate in their work and make a very substantial contribution. This is something of an innovation for summits. In the past, with a few exceptions, summitry was a wholly governmental activity. These new efforts to get the private sector deeply involved have a lot of advantages, but the process has been unfamiliar to all the participants. The consequence is that progress in both of these areas is not as rapid as had been hoped. The task forces will be making progress reports at Genoa, with more work to follow.

Though the Italian paper is called Beyond Debt Relief, the campaign for more debt relief has not ceased. Though we are now in 2001, the Jubilee 2000 Campaign has not given up, but its successor, called 'Drop the Debt', is still pressing for debt forgiveness for poor countries. The G8 governments have now reached the point where they are forgiving 100 percent of their debts to eligible poor countries that are following IMF programmes. But, while the burden of the debts owed to the IMF and World Bank is being eased, those debts are not being forgiven. The pressure from Drop the Debt is that these debts to international institutions should be forgiven as well. My impression is there is still a certain amount of resistance on behalf of the G7 finance ministers to follow down that route.

There is another aspect of debt relief which is of interest to some G8 countries, in particular the United Kingdom. That focuses on trying to help those heavily indebted countries which are in conflict or post-conflict situations, so that they too can benefit from the Heavily-Indebted Poor Countries (HIPC) programme. Most of those who have not yet benefited have failed to do so because of war or internal conflict.

Global Environment

I do not have so much to say about the environment. I think the Italians may well be wishing they hadn't chosen this as a favoured topic since the Bush administration has come out in opposition to the Kyoto protocol. Nonetheless, Genoa could still be useful in the debate about the Kyoto protocol. The timing of the Summit falls in the middle of the next international meeting on climate change, which is following on from The Hague meeting of last November. This means that the Summit could take up this issue if they thought there was progress to be made at head of government level. On the other hand, they can also just decide to leave it to the environmental discussions elsewhere.

There is some reason to think that Genoa might be quite a useful place for George Bush II and his peers to have some frank and serious talking about what to do next regarding climate change in the post-Kyoto regime. The sort of frank talking could be very useful, though it might not find its way to the public documents issued from the Summit. Whether or not the G8 heads make progress on climate change, I believe they will take the opportunity to take stock about what the rest of the global environment looks like. This would be a timely discussion leading up to the UN's Rio +10 Conference, which will take place during 2002. I think there are some areas of the global environment discussion which are showing positive results. For example, there has just been an agreement concluded on hazardous chemicals, while there also seems to be evidence that the Montreal Protocol is having an effect on reducing the size of the hole in the ozone layer. I have no doubt the G8 will be looking for other examples where discussion of the global environment are producing results.

Global Economic Situation

One economic topic might still flare up at short notice. If we should see between now and Genoa a sudden deterioration in the US economy, I think that would bring the fate of the world economy onto the Summit agenda. It looks less likely now that it did a month or two ago, but it still is something which could move up the summit agenda without warning.

Organisation and Politics

In conclusion, I want to say a bit about various elements of the organization and logistics of the Genoa Summit and about the political environment.

Contacts with Civil Society

Like the Japanese before them, the Italians have taken a lot of trouble to get input from NGOs and other members of civil society. They have designated a number of Italian institutes and private sector bodies to canvas and mobilize NGO opinion. The Italian Sherpa team came to London earlier this year and had a meeting with a range of NGOs that have their headquarters in London. This focused on development, environment and conflict prevention issues and was a very constructive meeting. I was asked to take part and chair one of the sessions.

But for all of the efforts that have been made to get on the right side of the NGOs, I think the Italians are extremely worried they may be confronted in Genoa with the sort of violent scenes which have appeared at Seattle and Washington, Prague and Quebec City. My understanding is that Genoa is actually a very difficult place for crowd control. The choice of Genoa as a summit site was largely made due to political considerations, not with the thought that the hosts were going to have to cope with a large and angry crowd.

A different sort of problem is a shortage of suitable accommodation for the visiting delegations. It appears that one solution under consideration is to accommodate the visiting delegations on Italian cruise ships moored in Genoa harbour. I have even heard a rumour that the Italians might decide to have the Summit meetings themselves on board ship.

Political Background

You will observe that in this presentation I started mainly with the good news. I am now moving into the less good news for the Italians. This includes dealing with climate change and hostile demonstrations; they also have the problem that they have just had a change of government. The government of Amato, D'Alema and Prodi - which was essentially the same government under different prime ministers - has now fallen and a quite different government under Silvio Berlusconi has come in.

Berlusconi does have the advantage that he has chaired a Summit before. He had just taken over at the time of the Naples Summit in 1994, but he did not last in office very much longer afterwards. I think that all the other G8 members are hoping that Berlusconi and his team will have the sense to recognize that the previous government has done very well in preparing the summit so far and thus will maintain continuity.

This does mean that the political environment at Genoa will be a bit unpredictable. There will be a new Italian prime minister in the chair; a new prime minister in Japan, very much an untried quantity; a new president in the United States, still finding his way; and French president Jacque Chirac may already have his mind on the elections he must face in less than a year from now. So it may well be that, despite all this good preparation, the Genoa Summit won't be able to make as much progress as was hoped.

Conclusion

That may be bad news for the Italians, but it could be good news for the Canadians who will be hosting the Summit in 2002. If the Canadians are wise, they should seek to revive some of the momentum generated in the preparations, but which may not finally come to fruition at Genoa itself. These issues could be carried over to the Summit on Canadian soil just over 12 months from now. My impression is that, just as the Italians wanted to maintain continuity with what the Japanese did before them, the Canadians are already thinking ahead to the Summit for next year to obtain maximum synergy with this year's work.

There is one problem that the Italians probably will not have to resolve. It is in the Canadian presidency that a decision will have to be reached on whether President Putin is allowed to host the Summit in 2003. This is now the G8 summit, so there would be a certain justice in allowing the Russians to take their place in the summit cycle. President Putin has definitely thrown his hat in the ring. But a number of G8 countries still have a certain hesitation about having a summit chaired by the Russians before Russia is more integrated into the international economy than it is now. This problem has been finessed at all the previous summits when it became an issue and it can be finessed again in Genoa; but I think it will preoccupy the Canadians over the next 12 months.